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State-Variable Public Goods and Social Comparisons over Time

  • Aronsson, Thomas

    ()

    (Umeå School of Business and Economics)

  • Johansson-Stenman, olof

    ()

    (School of Business, Economics and Law)

The optimal provision of a state-variable public good, where the global climate is the prime example, is analyzed in a model where people care about their relative consumption. We consider both keeping-up-with-the-Joneses preferences (where people compare their own current consumption with others’ current consumption) and catching-up-with-the-Joneses preferences (where people compare their own current consumption with others’ past consumption) in an economy with two productivity types, overlapping generations and optimal nonlinear income taxation. The extent to which the conventional rules for public provision ought to be modified is shown to depend on the strength of such relative concerns, but also on the preference elicitation format.

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File URL: http://hdl.handle.net/2077/32448
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Paper provided by University of Gothenburg, Department of Economics in its series Working Papers in Economics with number 555.

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Length: 43 pages
Date of creation: 28 Feb 2013
Date of revision:
Handle: RePEc:hhs:gunwpe:0555
Contact details of provider: Postal: Department of Economics, School of Business, Economics and Law, University of Gothenburg, Box 640, SE 405 30 GÖTEBORG, Sweden
Phone: 031-773 10 00
Web page: http://www.handels.gu.se/econ/
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